Credit Agricole CIB Research discusses GBP outlook and maintains a sell-on-rallies bias.
"One recent reason for the recent decoupling between the GBP and the rest of the European G10 currencies has been the outcome of the BoE August policy meeting. Indeed, the BoE signalled last week that there is now scope for some moderate tightening in the UK to the tune of 50bps over the next three years (from current 10bps) starting from 2022," CACIB notes.
"Last but not least, the BoE still doesn’t see any significant risk of a run a way inflation in part because there was a limited scope for over heating of the UK economy beyond 2022. In all, we think that the BoE should remain hesitant to join the camp of the hawkish G10 central banks. In turn this continues to warrant a cautious outlook on the GBP especially vs the USD in the near-term...With some positives in the price of the GBP by now, we think that the GBP should remain sell on rallies also vs other European G10 currencies," CACIB adds.